Scott Bessent Resurrects Wildcat Banking in Lincoln’s Name

On Wednesday, October 21, 2026, the Office of the Comptroller of the Currency (OCC) issued its final rule implementing the Guiding and Establishing National Innovation for US Stablecoins Act, known as the GENIUS Act. To mark the release, Treasury Secretary Scott Bessent offered a historical comparison that ought to make anyone familiar with nineteenth-century banking wince. “Just as President Abraham Lincoln’s National Currency Act of 1863 established a national framework for bank-issued currency,” Bessent said, the new regulations provide “a clear, practical foundation for private-sector innovation, competition, and American leadership in digital assets.”

It is a remarkable analogy, and a completely inverted one. Lincoln and his Treasury secretary, Salmon P. Chase, did not establish a national banking framework to help private financiers issue competing substitutes for the dollar. They did the exact opposite: they used the sovereign authority of the federal government to extinguish the chaotic, crisis-ridden era of antebellum “wildcat banking” and assert a public monetary monopoly. By invoking Lincoln to justify regulatory shelters for private crypto tokens, the Treasury is dressing up a dangerous, thoroughly debunked zombie idea in the costume of Civil War state-building.

At issue in the OCC’s new regulation, which establishes 12 CFR Part 15 and takes effect on January 18, 2027, is a basic structural question: Can private companies issue synthetic dollars that function like interest-bearing bank deposits without being regulated like banks? When Congress passed the GENIUS Act in July 2025, lawmakers included an explicit statutory prohibition preventing stablecoin issuers from paying interest or yield to token holders. The legislative logic was clear. If unregulated digital tokens can pay interest, deposits will flee federally regulated banks and flow directly into uninsured shadow conduits.

In February 2026, the OCC published a proposed rule that took that statutory mandate seriously, establishing a rebuttable presumption that third-party platforms offering “rewards” or yield on token balances violated the law. But over the intervening months, financial lobbyists pushed hard to carve out an escape hatch. In the final rule released Wednesday, Comptroller Jonathan Gould quietly stripped out that presumption. Instead, the agency announced that it will review third-party yield arrangements on an opaque, “case-by-case” basis. In the text of the rule, the OCC explained that “[b]ecause payment stablecoins are a nascent market, the OCC does not believe that it is appropriate to impose a rebuttable presumption with respect to the yield prohibition at this time.”

The official defense of this retreat, voiced by Gould and Bessent, is that rigid rules would stifle fintech competition. Stablecoins, they note, must maintain one-to-one reserve backing in cash and Treasury bills, submit to two-day redemption requirements, and undergo annual audits. If digital platforms offer reward yields to attract customers, regulators insist they retain enough supervisory discretion to stop abuses without crushing market innovation.

This argument holds up only if one ignores the entire history of modern financial crises. As Paige Pidano Paridon of the Bank Policy Institute warned, replacing clear prohibitions with administrative ambiguity “puts the banking system and its customers at risk of deposit flight.” Rob Nichols, president and CEO of the American Bankers Association, said that the rule “will preserve the status quo for crypto platforms despite Congress’s clear intent to protect local lending.”

Consider the economic mechanics. Regulated commercial banks operate under strict public constraints: they must hold reserves, pay premiums into the Federal Deposit Insurance Corporation’s fund, and fulfill Community Reinvestment Act mandates that require lending to local small businesses and home buyers. A crypto exchange offering a 5 percent yield on dollar-pegged tokens faces none of those social obligations. Allowing crypto platforms to pay interest-like returns creates an unlevel playing field that siphons deposits out of regional economies and concentrates capital in speculative funds.

Worse, backing a token with short-term government debt does not eliminate run risk. We learned this lesson during the 2008 financial crash, when uninsured money market mutual funds broke the buck and threatened to freeze global credit until the federal government stepped in with emergency public backstops. A private dollar substitute that pays yield is not sound currency; it is shadow banking. When panic strikes, investors do not wait for two-day redemption windows. They stampede for public cash, forcing issuers to liquidate assets in fire sales.

That brings us back to Lincoln. In 1863, the United States was choked by thousands of different state bank notes, circulating at unpredictable discounts and collapsing into worthlessness whenever confidence slipped. Lincoln’s National Currency Act, followed by the National Bank Act of 1864 and an aggressive 10 percent federal tax on state bank notes in 1865, deliberately taxed private currencies out of existence. Lincoln understood what neo-Keynesian economists have spent decades re-explaining: money is an essential public utility, not a private commodity designed to generate rents for financial middlemen.

The Federal Reserve and the FDIC have yet to finalize their own rules under the GENIUS Act. If they follow the OCC’s lead and leave the back door wide open for shadow-bank yields, they will not be fostering innovation. They will simply be resurrecting the costliest financial illusions of the nineteenth century, leaving ordinary households to absorb the blow when the private currency experiment inevitably unravels.